European Market Sentiment Remains Weak, French Bond Stabilized Amid Rising Political Turmoil

Bridgette Randall
17 Jun, 2024
Frankfurt

European markets lacked direction in Monday's trading after falling sharply last week amid rising political turmoil in France. 

Benchmark indexes in Paris, Frankfurt, and London traded around the flatline, and the French bond yields stabilized after rising to a seven-month high of 3.24% last week. 

Investor sentiment was on edge after French President Emmanuel Macros called a snap election, following the European Union election results showing the sharp rise of far-right parties. 

Local opinion polls indicate that the National Rally Party is likely to make significant gains in the parliamentary elections scheduled for June 30 and July 7, which could worsen the country's fiscal situation and threaten the stability of the eurozone. 

France's debt to gross domestic product is hovering just over 110% and its annual budget deficit is near 5%, which is likely to miss the 3% target in 2027. 

On the economic front, wages in the eurozone rose in the first quarter, matching the rate in the final quarter of 2022, Eurostat reported on Monday. 

In Europe, the Bank of England is expected to hold steady its key policy rate at 5.25%, and the UK’s consumer price inflation is expected to slow to 2%.

In addition, the Norges Bank and the Swiss National Bank are also scheduled to release their monetary policy decisions.

In other economic news in the region, investors are looking forward to the release of the EU's new car registration, the UK's retail sales, and Germany’s producer price inflation.

 

Eurozone Wage Growth Accelerated in the First Quarter

Negotiated hourly wages and salaries in the eurozone advanced 5.3% from a year ago in the first quarter, following an upwardly revised 3.2% increase in the previous quarter. 

Of the four largest economies in the region, calendar-adjusted wages in Germany accelerated to 6.3% from 2.1% in the previous quarter; Italy rose 3.3% from flat; Spain edged slightly higher to 4.5% from 4.4%; and France slowed to 2.6% from 2.7%, respectively. 

Wage growth accelerated in professional scientific and technical activities to 6.7% from 1.6%, construction to 6.1% from 4.4%, manufacturing to 5.8% from 4.7%, and financial and insurance activities to 5.8% from 4.4%, respectively. 

Meanwhile, wage growth slowed for the mining and quarrying sector to 7.8% from 11.1% in the previous quarter, water supply and sewage to 5.7% from 5.5%, transport and storage to 5.1% from 5.8%, utilities to 2.3% from 5.3%, and retail trade to 4.6% from 4.9%. 

 

Europe Indexes and Yields

The DAX index increased by 0.001% to 18,003.75; the CAC-40 index fell by 0.03% to 7,500.91; and the FTSE 100 index declined by 0.1% to 8,138.79. 

In the last week, the CAC-40 declined 4.3% and fell the most since March 2022, the DAX index dropped 2.4%, and the FTSE 100 index decreased 1.0%. 

The yield on 10-year German bonds edged lower to 2.38%. French bonds inched lower to 3.14%; the UK gilts edged lower to 4.07%; and Italian bonds decreased to 3.94%.

The euro edged lower to $1.077; the British pound inched higher to $1.277; and the U.S. dollar weakened to 89.20 Swiss cents.

Brent crude decreased $0.14 to $82.47 a barrel, and the Dutch TTF natural gas rose by €0.72 to €34.24 per MWh.

 

Europe Stock Movers

China-linked French luxury stocks traded down after a flood of China's economic data showed a fragile and uneven economic recovery. 

Retail sales growth accelerated in May, but property prices continued to drift lower in search of a bottom. 

LVMH declined 0.7% to €706.80, Kering dropped 0.1% to €302.15, and Hermes fell 0.6% to €2,100.0.

ING Group increased 1.7% to €15.58 after the Dutch bank targeted annual total income growth between 4% and 5% over the next three years to 2027. 

Carl Zeiss Meditec AG dropped 15.5% to €71.10 after the medical devices and technology maker said revenue in the first 8 months to May declined 3% from a year ago to €1.26 billion from €1.3 billion a year ago. 

The company said that because of weak order flows in April and May, it has lowered its full-year revenue outlook for the current fiscal year.

The company lowered its full-year fiscal 2024 revenue to €2 billion, excluding the recent acquisition of DORC. 

Topdanmark soared 22% to DKK 349.20 after the Finland-based insurer Sampo agreed to acquire its rival for DKK 33 billion, or $4.7 billion.

Ascential PLC increased 1.9% to 337.0 pence after the UK-based event management company reiterated its full-year revenue outlook ahead of its presentation to investors on June 19. 

The company recently completed its £300 million stock tender offer and £450 million special dividend.